Back

Potential Reasons for GM’s Bankruptcy

Last Updated May 28, 2019

A man in a dark suit and blue checkered tie sitting down talking into a camera about potential reasons for GM's bankruptcy in front of an out of focus library.

Transcript:

Very simply, Human Resource Management deals with any topic that relates to the people aspect of the business. That is, who we hire, how we train these people, how they get paid, how their health benefits are managed, anything that deals with people. So if you’re an organization that employs someone then you better know something about HR because HR is going to determine whether your business succeeds or whether it fails.

Well, very recently General Motors went bankrupt. And one might ask the question why did General Motors go bankrupt and have to be bailed out by the government. Well, many people felt that U.S. workers simply couldn’t compete with workers overseas. Well often international companies would come into the United States, use American workers and they had no problem competing at all. So clearly it wasn’t the U.S. workers.

Many people felt that U.S. workers could compete but they were too expensive. Actually, if you look at labor cost in that particular industry, American workers were very competitive on labor costs except for one thing and that is benefits. The benefits and the legacy workforce costs for General Motors were way higher than any other competitor in that industry.

Now you ask yourself, who gave away those benefits? Who failed to plan for the potential contingencies? Who failed to get that job done? Who was ultimately responsible for the failure of GM? The answer is HR professionals who managed the benefits program.

In today’s competitive environment, HR people need to be masters of both business and social issues. And in the last twenty years in my career, we’ve seen a real shift in HR professionals becoming much more business oriented and not making the kind of business mistakes they used to make in the past when they often came from backgrounds that didn’t necessarily have knowledge of strategic business concerns.

Again, for most products, probably the single most important element of the cost structure is the labor. Labor is a very expensive part of this and therefore we need to maximize the efficiency of the labor that goes into producing a new product to maintain its cost. Also if we’re going to compete on quality then we have to have workers that have the absolute best skills and create a product that is simply better than all the other products out there. So to the extent that we’re going to get work done through people, this is how we’re going to compete and if you don’t have the best people, it’s always an uphill battle.

So the key aspects of HR are to find and obtain the best people, motivate them every single day to perform their best and then retain them because other employers will come and try and steal them from you and so now what can you do to retain this particular workforce. If you can hire the best workers and motivate them to perform their best every single day and prevent other people from coming and stealing those employees, that’s a key formula for competitive advantage.